Since 1997, AG Bank has pioneered the involvement of financial institutions in agro-industry projects.

nowledge is sometimes more valuable than a credit line. For Chingiz Asadullayev (INTERVIEW), Chairman of the Board at Azerigazbank (AG Bank), that could sum up the assets of a private Azeri bank. If it offers a comparative advantage, knowledge is part of a bank’s capital stock.

AG Bank was established in 1992, with an initial 49 percent stake in the hands of state-owned Azerigaz, the natural gas company. The remaining 51 percent of shares was left in the hands of private individuals and companies in the natural gas industry. When the bank ran into accounting problems in 1994, the majority of stakes were sold off. Today, only 0.09 percent of equity capital remains in the hands of Azerigaz. “We suffered from the reputation of being public. Now we are more flexible and efficient,” says Mr. Asadullayev.

As the International Finance Corporation (IFC) and the Asian Development Bank prepare to disembark in Azerbaijan, they are considering a 37 percent equity stake in AG Bank. After all, the economic outlook is robust and the boom has only just begun. It is also a golden opportunity for AG Bank to pick up new management skills and strengthen risk procedures. “Foreign banks want to come and buy. But they are also looking to develop banks institutionally. One needs to learn, learn and learn again,” says Mr. Asadullayev.

CHINGIZ ASADULLAYEV Chairman of the Board Azerigazbank

If the banking industry is the mirror of the economy, AG Bank indicators could not be rosier. From 2002-2003, the bank grew fourfold. As of September 2005, total assets amounted to $57 million and equity had risen to $7.5 million. Net revenue grew from $0.943 million in 2004 to $1.34 million a year later. The capital adequacy ratio (CAR) of 10 percent stipulated by the central bank was well above the minimum by September 2005, at 15.4 percent. Overall, AG Bank is ranked second in Azerbaijan’s private sector and fifth in terms of its loan portfolio.

Last September, the bank announced it had completely used two credit lines of the European Bank for Reconstruction and Development (EBRD), which totaled $3.5 million. A further co-financing agreement is to be signed with the EBRD to back large-scale projects in the future.

In addition to its headquarters in Baku, AG Bank operates eight branches in the country. “In five years I’d like to see AG Bank in a joint partnership with an international financial institution. Our strategy is to be among the most advanced banks in the country. Certainly, we want to achieve the leading position in some areas,” says Mr. Asadullayev.

AG Bank follows a strategy of growing alongside its customers. By instituting good governance principles, it hopes to attract the attention of more corporations, like Improtex. Initially a travel agency, Improtex later branched out into tourism and automobiles. Today, it has grown into one of Azerbaijan’s largest holdings. Mr. Asadullayev wants to use his skills in financial intermediation to educate clients about maximizing their potential.

Mr. Asadullayev is interested in partners that can transfer know-how. Azerbaijan may have prodigious oil and gas reserves but resources will not be properly allocated without investing in education and training. “I would like foreign investors to come here, establish businesses and teach people how to manufacture products that say ‘made in Azerbaijan’,” says Mr. Asadullayev.